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At present, two subsidy policies, which are based on electric vehicle (EV) consumers and EV charging station firms, have been widely implemented in different areas in China to promote EV adoption. However, the effectiveness of subsidy policies is significantly influenced by the indirect network and herd effects, depicting the positive impacts of the numbers of energy infrastructure firms and the sales of vehicles on consumers' utilities, respectively. Taking the aforementioned effects into consideration, this study examines the optimal subsidy policies by developing a Stackelberg game model. The game model analyzes the interaction and decisions of multiple stakeholders (i.e., consumers, energy infrastructure firms, EV and gasoline vehicle manufacturers, and the government). Interestingly, we find that a stronger herd effect will promote EV sales when the unit production cost of EVs is low; however, it will hinder EV sales when the unit production cost is high. Besides, we compare the effectiveness of the two subsidy policies for promoting EV adoption, reducing environmental impacts, and increasing the social welfare. Findings show that the effectiveness of subsidy policies highly depends on the extent of the indirect network and herd effects. Specifically, compared with EV consumers-based subsidy policy, EV charging station firms-based subsidy policy will be more effective in only two conditions: a weak indirect network effect and a strong herd effect. Otherwise, the EV consumers-based subsidy policy will be more effective. The findings of the paper are helpful in enhancing the effectiveness of subsidy policy in China. • Government subsidy cannot always promote electric vehicle adoption. • The indirect network and herd effects affect the effectiveness of subsidy policy. • A stronger herd effect will not always promote electric vehicle sales. • Either consumers or charging station investors can be the best subsidy object. [ABSTRACT FROM AUTHOR]

With the popularity of open source software (OSS) as an alternative to proprietary software (PS), proprietary-software firms such as IBM and Microsoft started to embrace this new paradigm during the past decades. We analyze how firms choose the software development strategy between OSS and PS, by constructing a duopoly model in which consumers sequentially purchase software and complementary services in a market that exhibits an indirect network effect. We show that a PS firm may benefit from the presence of an OSS firm, and the software market can be dominated by a single OSS if the indirect network effect is weak and the cost saving effect of OSS is negligible. We also show that the market can support two OSS if the cost saving effect of OSS is sizeable, and two PS if firms can provide fully compatible services to competitor's PS. Building upon the existing works that investigate the competition between PS and OSS, this study improves our understanding of the role of OSS in firm's software development strategy and market equilibrium. [ABSTRACT FROM AUTHOR]

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Various policies on electric vehicles (EVs) have been implemented in Beijing to promote EV diffusion, but previous research has rarely considered the indirect network effects between EVs and EV charging infrastructures (EVCIs), and has not explored the impact of EVCI-related incentives on EV diffusion. This study aims to enrich the literature by incorporating EVCI development and indirect network effects in EV diffusion. A system dynamic model is proposed to systematically analyse the interactions among consumer, EV manufacturer and EVCI operator and simulate EV diffusion and ECVI investment in Beijing. Multiple scenarios are adopted to investigate the joint effects of the policy mix on EV diffusion. The results indicate that the oil-to-electricity subsidy promoted EVs and EVCIs to a greater extent than the license plate control policy. The EVCI maintenance policy outperformed EVCI construction and production subsidies on EV diffusion. Synergistic effects exist when the oil-to-electricity subsidy is mixed with EVCI-related incentives. This study provides implications for policymakers to promote EV diffusion with innovative and efficient policy instruments. [ABSTRACT FROM AUTHOR]

In the context of two-sided markets, we propose hardware lifecycle as a key moderator of the impact of superstar and non-superstar software on hardware adoption. A hardware's earlier adopters are less price sensitive and have a higher preference for exciting and challenging software. In contrast, later adopters are more price sensitive and prefer simplicity in software. Superstar software tend to be more expensive and more complex compared to non-superstars. Therefore, earlier (later) adopters prefer superstars (non-superstars), which leads to higher impact of superstars (non-superstars) on hardware adoption in the early (later) stages of the hardware lifecycle. Using monthly data over a 12-year timeframe (1995–2007) from the home video game industry, we find that both superstar and non-superstar software impact hardware demand, but they matter at different points in the hardware lifecycle. Superstars are most influential when hardware is new, and this influence declines as hardware ages. In contrast, non-superstar software has a positive impact on hardware demand later in the hardware lifecycle, and this impact increases with hardware age. Findings reveal that eventually the amount of available non-superstar software impacts hardware adoption more than the amount of available superstar software. We provide several managerial implications based on these findings. [ABSTRACT FROM AUTHOR]

This paper develops and estimates a structural model of two-sided markets with durable platform intermediaries and affiliated products. It models buyers' purchase decisions of platforms and affiliated products and sellers' decisions of price setting and entry, accounting for the dynamic interaction between the two distinct groups of platform participants. To estimate the proposed model, this paper develops a Bayesian Markov chain Monte Carlo estimation approach that incorporates nonparametric approximation and interpolation methods. The proposed model and estimation method are applied to the 32/64-bit generation of the U.S. video game industry. The results of counterfactual experiments show that the dynamic behavior of platform participants has significant impacts on platform adoption and the affiliated product market, and that a failed platform could have survived if it had priced the two sides properly in a dynamic two-sided market environment. This paper was accepted by Matthew Shum, marketing. [ABSTRACT FROM AUTHOR]

We consider a dominant platform provider operating both legacy and new platforms that connects users with suppliers in a two-sided market context. In addition to the typical indirect network effects in the two-sided market, backward compatibility works on the new platform. Thus, users joining the new one can also enjoy the services provided by suppliers using the legacy platform. Users and suppliers are linearly differentiated between two platforms as in the Hotelling model and play a subscription game of choosing one platform at the lower level. The suppliers in the new platform may suffer from congestion, which can be alleviated by platform provider’s investment on the new one. The platform provider also determines price margins for the supplier sides. Our equilibrium (eq.) analysis in the subscription game identifies an interior eq. (coexistence of both platforms in both sides). Though the backward compatibility plays a stabilizing role for the interior eq., its stability is fragile due to the network effects. Rather, some boundary eq.’s, where at least one side tips to the legacy or the new platform, are more likely to be stable. The backward compatibility is a key factor that characterizes the stable boundary eq.’s. The upper stage game is led by the platform provider, which tries to maneuver the system toward one of the stable boundary eq.’s using price margins and investment. The platform provider prefers an all-new boundary eq. when the indirect network effect and the maximum price margin for the new platform are large; thus, it puts a significant investment in the new one. With a small indirect network effect for suppliers, however, the platform provider does not invest in the new platform and choose a separate boundary eq. where two sides split into different platforms. Whether the user side completely tips to the new one (completely separated eq.) or not (partially separated eq.) depends on the backward compatibility. The relative advantage of the all-new eq. over the separate eq.’s in terms of social welfare from both sides depends on the backward compatibility as well as the indirect network effects for the new platform.

We investigate a market entry scenario where a technologically-superior new platform may overcome its installed base disadvantage with the backing of a strong keystone species advantage within the business ecosystem, called keystone effect in this study, over an incumbent in a market that exhibits indirect network effects. The strength of the keystone species impacts the availability of complementary goods, which is a key factor for a platform to increase its installed base. This study proposes a dynamic economic model to map a market landscape that shows the internal condition (entrant's keystone effect) and external conditions (incumbent's keystone effect and indirect network effects) under which a new platform can successfully enter (i.e., maintain oligopoly or monopoly share) or fail to enter a two-sided market in a winner-take-all scenario. We then illustrate the model's applicability by examining the entry of Worldwide Interoperability for Microwave Access (WiMAX) into the global mobile telecommunications market, employing recent market data from 2009 to 2012 as well as forecast scenario data from 2010 to 2014. In both the historical data and hypothetical forecast scenario we find that WiMAX's keystone effect disadvantage and the market's indirect network effects were cumulatively strong enough to prevent the new technology standard from successfully competing with the incumbent (cellular 3G and Long Term Evolution) for oligopoly or monopoly share in the long run. [ABSTRACT FROM AUTHOR]

We consider a dominant platform provider operating both legacy and new platforms that connects users with suppliers in a two-sided market context. In addition to the typical indirect network effects in the two-sided market, backward compatibility works on the new platform. Thus, users joining the new one can also enjoy the services provided by suppliers using the legacy platform. Users and suppliers are linearly differentiated between two platforms as in the Hotelling model and play a subscription game of choosing one platform at the lower level. The suppliers in the new platform may suffer from congestion, which can be alleviated by platform provider's investment on the new one. The platform provider also determines price margins for the supplier sides. Our equilibrium (eq.) analysis in the subscription game identifies an interior eq. (coexistence of both platforms in both sides). Though the backward compatibility plays a stabilizing role for the interior eq., its stability is fragile due to the network effects. Rather, some boundary eq.'s, where at least one side tips to the legacy or the new platform, are more likely to be stable. The backward compatibility is a key factor that characterizes the stable boundary eq.'s. The upper stage game is led by the platform provider, which tries to maneuver the system toward one of the stable boundary eq.'s using price margins and investment. The platform provider prefers an all-new boundary eq. when the indirect network effect and the maximum price margin for the new platform are large; thus, it puts a significant investment in the new one. With a small indirect network effect for suppliers, however, the platform provider does not invest in the new platform and choose a separate boundary eq. where two sides split into different platforms. Whether the user side completely tips to the new one (completely separated eq.) or not (partially separated eq.) depends on the backward compatibility. The relative advantage of the all-new eq. over the separate eq.'s in terms of social welfare from both sides depends on the backward compatibility as well as the indirect network effects for the new platform. [ABSTRACT FROM AUTHOR]